Eddie

How competitive is wind energy compared to the others?

You all have heard it said that wind energy needs subsidies to compete with other forms of electricity generation.  We have often written on this subject before, and it seems appropriate to restate the arguments.

The context of wind and solar comparisons usually revolves around grid parity with existing fossil fuel fired plant.  Most generation plant is relatively old now and the boilers and turbines are fully depreciated.  The only costs that are incurred are the fuel cost and the staff costs.  Wind and solar costs are only about the capital expenditure, as running costs are low and the fuel is free. There is no effective way to compare an old fossil fired plant, which has to be replaced in the next ten years, and whose fuel is expensive, and highly variable,  with a wind or solar plant, whose fuel is fixed and free, as well as having an infinite life.  This is without placing any value on the principle externality, ie CO2 pollution.  Wind makes electricity without producing CO2.

The world insurance companies are currently picking up the cost of the effects of global climate change, for companies or countries that are insured that is.  Many countries self insure, particularly in the emerging markets.  One way or another society pays for the catastrophic costs of the effects of 400 PPMV CO2.

There are few places where real comparisons can be made.  In South Africa for instance, the Parliament commissioned a study of the costs of Medupi and Kusile, two coal fired plants under construction.  These plants have known capital costs and known fuel costs. The coal is produced locally and is not internationally traded, so there is no variability associated with its price.  The levelised costs of the unit of electricity, from these plants is 0.99 Rand per kilowatt-hour.  In the latest round of the competition for wind energy, the average kilowatt-hour price was R 0.89.  In a like for like comparison wind energy is cheaper than coal.  No charge is made in Medupi or Kusile for pollution abatement costs.

In the case with nuclear, the comparison is clearer.  Flamanville in France is costing  €5.15 million per megawatt to build.  In Finland Olkilauto 2 is costing €6 million per megwatt to build.  This is around three times more expensive than on shore wind generation, and 75% more expensive than offshore wind generation.  Governments do not have to commit to being the insurer of last resort with wind as happens with nuclear.  Nor is a need for a massive sinking fund, usually provided from direct taxation to decommission the nuclear plant, or for an equally large fund to decommission the nuclear materials reprocessing plants. 

There are costs associated with high penetrations of wind energy which we will discuss shortly.

5 Responses to How competitive is wind energy compared to the others?

  1. Roger Faulkner September 30, 2013 at 11:45 pm #

    I do take issue with what you said about wind turbines having an infinite life. Truth is, who knows? I hope so. After 100 years I know many components will have been replaced, but I think your point is, it will always be possible to repair or upgrade them. Perhaps that is true.

  2. Oscar H Diaz October 1, 2013 at 12:31 pm #

    Dear Mr. O´Connor

    In December 2012, was estimated that the full cost of building the reactor Olkilauto 3 would be about €8.5 billion, very very expensive.
    In my country, Spain, some solar companies are closing, others do not get credits for research, and investors fear for the future.
    European goverments should support renewable energy cause it´s our future and our energy independence.
    Thank you for his interesting blog and and for allowing my answer.
    Beir bua agus beannacht

    Oscar (Renewable consultant)

  3. Luke October 30, 2013 at 8:55 pm #

    Dear Mr O’Connor.

    Do your cost estimates include the following?

    – average cost per 1MW decomissioning of a wind turbine including concrete foundation and including reinstating the land after 20 years of service and who usualy covers this?

    – average cost per 1 MW of a potential storage facility (ie battery) including its maintenance and decomissioning after its life span which with current technology would be shorter than the life of the wind turbine itself

  4. Patrick Phillip November 12, 2013 at 3:47 pm #

    Colin – you are missing the point. The National Grid is a widely distributed network whose electricity “load” is supplied by a number of different sources of power generation located geographically on the network.

    A good illustration of this is when everyone switches their kettle on at the end of Eastenders, the electricity in your kettle in say London could be there because the HEP turbines at Dinorwig in Wales have just been turned on.

    My point is if the wind isn’t blowing at one site then it will be at another. Denmark have done a number of studies on loss of load probability (LOLP) and conclusions are that a renewable dominated power system works just as well if not better than a fossil fuels based system.

  5. John Callaghan December 2, 2013 at 11:16 am #

    Surely no one would consider there was any value in comparing the capital cost of two different methods of generating electricity, one which works all the time and one which works on average about one day in four, which cannot be effectively predicted?

    Imagine comparing the cost ow two different wheels one which could be used every day and one which could only be used one day in four, on days you could not preplan their use?

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